The United States reached a $28.5 million settlement with a private for-profit corporation that operates 35 skilled nursing facilities (SNF), most located in California following allegations that the corporation engaged in a scheme to submit false claims to Medicare and TRICARE for medically unnecessary rehabilitation therapy services. Under the settlement, the corporation entered into a corporate integrity agreement (CIA) with the HHS Office of Inspector General (OIG). In an unrelated case, the OIG imposed a $3 million penalty—the largest penalty for CIA violations to date—on another provider that failed to correct improper billing practices during the term of its CIA.

Settlement and CIA for false claims scheme

North American Health Care Inc. (NAHC), its chairman of the board, and its senior vice president of reimbursement analysis will pay $30 million to resolve allegations that they violated the False Claims Act (31 U.S.C. §§3729–3733) by causing the submission of false claims to Medicare and TRICARE for medically unnecessary rehabilitation therapy services provided to skilled nursing facility (SNF) residents. The government alleges that the senior vice president of reimbursement analysis contributed to the conduct by creating the improper billing scheme and that the chairman reinforced the scheme at NAHC facilities. As part of the settlement, NAHC entered into a five-year CIA with the OIG requiring an independent review organization to annually review therapy services billed to Medicare.

Violation of CIA

Kindred Health Care, Inc., paid a penalty of more than $3 million to the federal government for failing to comply with a CIA, marking the largest penalty for CIA violations to date. Kindred entered into a CIA with the OIG after it was discovered that Kindred billed Medicare for hospice care provided to patients who were not eligible for the services. In audits mandated by the CIA, internal auditors found that Kindred failed to correct improper billing practices in the fourth year of its five-year agreement. The OIG caught wind of the noncompliance during several unannounced visits.

“This penalty should send a signal to providers that failure to implement these requirements will have serious consequences,” said Inspector General Daniel R. Levinson. “We will continue to closely monitor Kindred’s compliance with the CIA.”